X

Register to download the report. Already a member?

Download PDF

Click Here for $250 / 6 months

Click Here for $450 / year

Interview

with Eirik Bergsvik, CEO, Interwell

21.03.2013 / Energyboardroom

You are well known in the industry for taking NOV’s operation in Norway to become the world’s leading drilling equipment supplier to the offshore industry. When you took the decision to trade that in for your current position at Interwell, how much similarity did you between Interwell’s position and that of NOV when you took that on in 2006?

Actually my main attraction to Interwell was because it was quite a different company. This move represented a new challenge, since my previous experiences were not specifically in line with downhole production and intervention. I found Interwell as an exciting company, because the products and services were so unique relative to the offering of competitors.

Interwell is a small niche company and having worked for a large global enterprise, I had the option of making greater changes. Another factor for me personally was the fact that
Interwell is a fully Norwegian company, and I was attracted by the challenge to turn it into an international success. I felt that the reach of the company could be as broad as any other company.

Interwell is by far not the biggest players in oilfield technology, although we are a significant player. We have technology adjusted for the challenging conditions of the Norwegian Continental Shelf (NCS). These technologies are also a product of the Norwegian regulatory environment, which keeps technology companies on their toes with regard to statutory requirements and high standards. These two factors drive us to be a top of the shelf player in the oilfield services field.

Norwegian standards are high for the sole purpose of avoiding catastrophes as we have seen recent years. We feel confident about our technological capabilities, which are in line with our safety standards. Other countries are also making promising breakthroughs, and perhaps in Norway it is our small size that makes us more efficient and safe compared to large countries.

What role do you see the high cost level in Norway playing on technology development?

Industry clients, as well as other oil and gas companies claim oil service companies are setting their prices too high. In fact, we are not the ones responsible for this, but rather our country’s wealth and standard of living. Cost drivers are therefore outside of our control, and when companies like Statoil or ConocoPhillips attract employees with high salary and social benefits, we must align with them if we want to find the talent we need.

Interwell is constantly finding new ways to contain our prices, like for instance going abroad and expanding the supply chain into regions with lower labor costs. However it is not easy for the supply industry to move down costs in line with the demands of operators. The real answer to reducing costs depends on industry-wide collaboration.

The former CEO of Norsk Hydro lead a Government initiative to compare rig costs between Norway’s and UK’s continental shelf. Norwegian costs were shown as much higher than in the UK, and even though many recommendations were made to reduce these costs, Norwegian stakeholders issued protests arguing safety measures could not be compromised to reduce costs. The fact is that if we genuinely believe that these standards cannot be compromised, then we must simply accept higher cost levels and move on with our work.

As the Norwegian oil and gas industry will not jeopardize its HSE standards, how do you intend to contain the human labor costs?

Offshore Norwegian employees are seen amongst the best in the world, and are rewarded as such. Nevertheless, the real issue is not only human labor costs, but how companies cut their spending and compromise on some of their mechanical services and installations. If a company reduces it costs by compromising on the mechanical side of the work then it is necessarily reducing the quality of output. If this is the case then our prestige and recognition for high quality services will decline and Norway must not fall into this trap.

To what extent is the high cost base a driver for innovation in Norway?

There is a strong link between the high cost level in Norway and the need for innovation. I believe that innovation is on the right path in Norway as it improves our products, making them smaller, lighter, and less costly.

However, there is one other element which needs to be improved, which is standardization. During my time in NOV, when we started our cooperation with Samsung Heavy Industries in Korea, NOV was pushing hard to generate standardization. The fact is that there are more than 50 identical drilling packages delivered to Samsung instead of 50 different packages. From an economic point of view, this is highly efficient as you bring the costs down quickly, and at the same time you constantly improve on quality as you are replicating the same product. As the quality improves you product becomes more reliable you are better able to contain costs. We must push the manufacturers and suppliers standardize their products, and stop clients from making small changes as much as possible. I believe that this represents one measure to contain costs in Norway. Indeed when the Norsok regulations were originally being put together, this type of standardization was one of its original remits.

You are well known in the industry for taking NOV’s operation in Norway to become the world’s leading drilling equipment supplier to the offshore industry. When you took the decision to trade that in for your current position at Interwell, how much similarity did you between Interwell’s position and that of NOV when you took that on in 2006?

Actually my main attraction to Interwell was because it was quite a different company. This move represented a new challenge, since my previous experiences were not specifically in line with downhole production and intervention. I found Interwell as an exciting company, because the products and services were so unique relative to the offering of competitors.

Interwell is a small niche company and having worked for a large global enterprise, I had the option of making greater changes. Another factor for me personally was the fact that
Interwell is a fully Norwegian company, and I was attracted by the challenge to turn it into an international success. I felt that the reach of the company could be as broad as any other company.

Interwell is by far not the biggest players in oilfield technology, although we are a significant player. We have technology adjusted for the challenging conditions of the Norwegian Continental Shelf (NCS). These technologies are also a product of the Norwegian regulatory environment, which keeps technology companies on their toes with regard to statutory requirements and high standards. These two factors drive us to be a top of the shelf player in the oilfield services field.

Norwegian standards are high for the sole purpose of avoiding catastrophes as we have seen recent years. We feel confident about our technological capabilities, which are in line with our safety standards. Other countries are also making promising breakthroughs, and perhaps in Norway it is our small size that makes us more efficient and safe compared to large countries.

What role do you see the high cost level in Norway playing on technology development?

Industry clients, as well as other oil and gas companies claim oil service companies are setting their prices too high. In fact, we are not the ones responsible for this, but rather our country’s wealth and standard of living. Cost drivers are therefore outside of our control, and when companies like Statoil or ConocoPhillips attract employees with high salary and social benefits, we must align with them if we want to find the talent we need.

Interwell is constantly finding new ways to contain our prices, like for instance going abroad and expanding the supply chain into regions with lower labor costs. However it is not easy for the supply industry to move down costs in line with the demands of operators. The real answer to reducing costs depends on industry-wide collaboration.

The former CEO of Norsk Hydro lead a Government initiative to compare rig costs between Norway’s and UK’s continental shelf. Norwegian costs were shown as much higher than in the UK, and even though many recommendations were made to reduce these costs, Norwegian stakeholders issued protests arguing safety measures could not be compromised to reduce costs. The fact is that if we genuinely believe that these standards cannot be compromised, then we must simply accept higher cost levels and move on with our work.

As the Norwegian oil and gas industry will not jeopardize its HSE standards, how do you intend to contain the human labor costs?

Offshore Norwegian employees are seen amongst the best in the world, and are rewarded as such. Nevertheless, the real issue is not only human labor costs, but how companies cut their spending and compromise on some of their mechanical services and installations. If a company reduces it costs by compromising on the mechanical side of the work then it is necessarily reducing the quality of output. If this is the case then our prestige and recognition for high quality services will decline and Norway must not fall into this trap.

To what extent is the high cost base a driver for innovation in Norway?

There is a strong link between the high cost level in Norway and the need for innovation. I believe that innovation is on the right path in Norway as it improves our products, making them smaller, lighter, and less costly.

However, there is one other element which needs to be improved, which is standardization. During my time in NOV, when we started our cooperation with Samsung Heavy Industries in Korea, NOV was pushing hard to generate standardization. The fact is that there are more than 50 identical drilling packages delivered to Samsung instead of 50 different packages. From an economic point of view, this is highly efficient as you bring the costs down quickly, and at the same time you constantly improve on quality as you are replicating the same product. As the quality improves you product becomes more reliable you are better able to contain costs. We must push the manufacturers and suppliers standardize their products, and stop clients from making small changes as much as possible. I believe that this represents one measure to contain costs in Norway. Indeed when the Norsok regulations were originally being put together, this type of standardization was one of its original remits.

Interwell is a highly innovative company; what is the balance to be struck between standardization and specific innovations?

Furthermore, a company may engage in standardization and still be a niche player. It all depends on how standardization is done. For every customer, country, field, and well, the well construction may be different, and standardization is difficult for us to apply. Yet by combining standard elements, one is capable of creating a certain level of standardization even when each solution is tailored. Standardization cannot be applied the same way and to the same extent in the downhole and drilling industry, but to some extent it is possible. It is also possible to manufacture products with a broader operational span than the narrower envelope of the instance where it is being used. In doing this, we can make more standard products.

We can look to other industries like the automobile industry for inspiration. In this industry, standardization is essential and it is the manufacturers who are setting the standards. Two cars can look identical but one will cost USD 10,000 and the other will cost USD 30,000 because under the bonnet and inside, certain elements have been tweaked to optimize the performance and comfort of the car. Cars now contain a large number of add ons pre-installed which you cannot use unless you pay for them. It is cheaper for the manufacturer to supply the add-ons even when they are not paid for because of standardization. It must be said that it is difficult to compare to the car industry due to the high volume and automated manufacturing.

In Norway, cars are fitted with additional cabin heaters because the diesel engines are so efficient and do not give off that much heat. This is an add on pre-installed and you can buy a car without it and then after a month go back to the dealer and pay for the add on. The dealer will then simply activate this in the car. There is no complex installation to do.

The oil and gas industry can take inspiration from this type of development. We can look to generate well plugs which utilize the same components across the range. Our products are niche and tailor-made but we can use similar principles.

In relation to technology development, Statoil can act as an overbearing mother, nurturing technology companies but breeding dependence on Statoil contracts and funding. What is the danger of this in relation to Interwell?

I have worked with Statoil for a long time and can say that Interwell’s relationship with Statoil has been extremely good from the perspective of technology development. The relationship has improved our quality, knowledge and technology. However, having Statoil as our largest client has also been essential in our international expansion. It is not the case that we can simply tell our foreign customers that we have cooperated with Statoil. However our experience and expertise in technology acquired with Statoil defines what we are able to achieve in terms of quality and design. As our costs are higher than our foreign competitors we provide them with higher capabilities and this is thanks to our work with Statoil and other clients on the NCS

The general picture of international expansion for Norwegian suppliers is that they are bought out by the Americans when they reach a certain size. How do you see the fate of Interwell?

In the majority of cases, this is an accurate picture. However, we need to understand whether this is problematic. In many cases this is what Norwegian technology wizards want to do. They would rather spend their time focusing on the technology and leave commercialization to others. However, it would be unfair to say that Norway does not have its fair share of entrepreneurs. The drilling technology companies of Kristiansand have been sold off to large American enterprises but still the commercial and technology development is based in Norway.
Interwell is pragmatic in wanting to build and grow a strong international oilfield service company. We do not yet know what will happen down the road. There is nothing stopping us from meeting our ambitions: we have the technology, the client base, and the staff across several countries.

Aside from the North Sea, interwell has been expanding significantly in the Middle East – what ties these two markets together?

Interwell has been present in the Middle East for many years but not on a big scale. However, over the last few years we have seen that our products suit the Middle East market very well. Now the Middle East represents our second largest market and the oil companies there appreciate our technology.

Customers in this region are very focused on technology. The whole world is moving in the direction of generating higher recovery rates. We mostly work on the face of a producing well, which is in the latest stage of production when companies observe higher rate of water production, pressure dropping, and overall production ratios sinking. This is the case for many wells in the Middle East and we provide our well intervention services to resolve these issues.

How are you developing your market entry strategy for other regions?

Apart from the Middle East we have recently been developing in the US market. Our results in the US, in this early stage are highly positive, and we have been working in Alaska. We will start looking into the Gulf of Mexico in this first quarter 2013.
Interwell US is a Norwegian owned company, yet its employees are American. Therefore, they are aware of the specificities of the North American market. Overall, our expectations for the US market are extremely high.

Do you think that Norwegian companies are particular in resisting the temptation to impose their cultural standards when developing new markets abroad?

Our country is small and most of our companies are small compared to many other international companies. I am certain that pushing other countries to adapt to our cultural standards is not the right way, especially when dealing with very different cultures like those of the Middle East. It is all about quality standards rather than business methods.

What matters to us, is to create an organization that defines the same quality standards to be applied worldwide. For example, our Interwell way of thinking is global, not Norwegian. Our inputs are not only Norwegian based, and we want to apply what is done best from other countries to adapt it to our Norwegian background.
Although, the common impression is that the international oil and gas market has a similar culture and language worldwide, many people would give different responses when qualifying what culture and language represent to them.
In the end one must adapt to the local environment, and this is what we have been doing to attain the success we have today.

Furthermore, a company may engage in standardization and still be a niche player. It all depends on how standardization is done. For every customer, country, field, and well, the well construction may be different, and standardization is difficult for us to apply. Yet by combining standard elements, one is capable of creating a certain level of standardization even when each solution is tailored. Standardization cannot be applied the same way and to the same extent in the downhole and drilling industry, but to some extent it is possible. It is also possible to manufacture products with a broader operational span than the narrower envelope of the instance where it is being used. In doing this, we can make more standard products.

We can look to other industries like the automobile industry for inspiration. In this industry, standardization is essential and it is the manufacturers who are setting the standards. Two cars can look identical but one will cost USD 10,000 and the other will cost USD 30,000 because under the bonnet and inside, certain elements have been tweaked to optimize the performance and comfort of the car. Cars now contain a large number of add ons pre-installed which you cannot use unless you pay for them. It is cheaper for the manufacturer to supply the add-ons even when they are not paid for because of standardization. It must be said that it is difficult to compare to the car industry due to the high volume and automated manufacturing.

In Norway, cars are fitted with additional cabin heaters because the diesel engines are so efficient and do not give off that much heat. This is an add on pre-installed and you can buy a car without it and then after a month go back to the dealer and pay for the add on. The dealer will then simply activate this in the car. There is no complex installation to do.

The oil and gas industry can take inspiration from this type of development. We can look to generate well plugs which utilize the same components across the range. Our products are niche and tailor-made but we can use similar principles.

In relation to technology development, Statoil can act as an overbearing mother, nurturing technology companies but breeding dependence on Statoil contracts and funding. What is the danger of this in relation to Interwell?

I have worked with Statoil for a long time and can say that Interwell’s relationship with Statoil has been extremely good from the perspective of technology development. The relationship has improved our quality, knowledge and technology. However, having Statoil as our largest client has also been essential in our international expansion. It is not the case that we can simply tell our foreign customers that we have cooperated with Statoil. However our experience and expertise in technology acquired with Statoil defines what we are able to achieve in terms of quality and design. As our costs are higher than our foreign competitors we provide them with higher capabilities and this is thanks to our work with Statoil and other clients on the NCS

The general picture of international expansion for Norwegian suppliers is that they are bought out by the Americans when they reach a certain size. How do you see the fate of Interwell?

In the majority of cases, this is an accurate picture. However, we need to understand whether this is problematic. In many cases this is what Norwegian technology wizards want to do. They would rather spend their time focusing on the technology and leave commercialization to others. However, it would be unfair to say that Norway does not have its fair share of entrepreneurs. The drilling technology companies of Kristiansand have been sold off to large American enterprises but still the commercial and technology development is based in Norway.
Interwell is pragmatic in wanting to build and grow a strong international oilfield service company. We do not yet know what will happen down the road. There is nothing stopping us from meeting our ambitions: we have the technology, the client base, and the staff across several countries.

Aside from the North Sea, interwell has been expanding significantly in the Middle East – what ties these two markets together?

Interwell has been present in the Middle East for many years but not on a big scale. However, over the last few years we have seen that our products suit the Middle East market very well. Now the Middle East represents our second largest market and the oil companies there appreciate our technology.

Customers in this region are very focused on technology. The whole world is moving in the direction of generating higher recovery rates. We mostly work on the face of a producing well, which is in the latest stage of production when companies observe higher rate of water production, pressure dropping, and overall production ratios sinking. This is the case for many wells in the Middle East and we provide our well intervention services to resolve these issues.

How are you developing your market entry strategy for other regions?

Apart from the Middle East we have recently been developing in the US market. Our results in the US, in this early stage are highly positive, and we have been working in Alaska. We will start looking into the Gulf of Mexico in this first quarter 2013.
Interwell US is a Norwegian owned company, yet its employees are American. Therefore, they are aware of the specificities of the North American market. Overall, our expectations for the US market are extremely high.

Do you think that Norwegian companies are particular in resisting the temptation to impose their cultural standards when developing new markets abroad?

Our country is small and most of our companies are small compared to many other international companies. I am certain that pushing other countries to adapt to our cultural standards is not the right way, especially when dealing with very different cultures like those of the Middle East. It is all about quality standards rather than business methods.

What matters to us, is to create an organization that defines the same quality standards to be applied worldwide. For example, our Interwell way of thinking is global, not Norwegian. Our inputs are not only Norwegian based, and we want to apply what is done best from other countries to adapt it to our Norwegian background.
Although, the common impression is that the international oil and gas market has a similar culture and language worldwide, many people would give different responses when qualifying what culture and language represent to them.
In the end one must adapt to the local environment, and this is what we have been doing to attain the success we have today.

LATEST ISSUE

DOWNLOAD

Most Read